First time cost of employee misunderstanding has been researched
On average businesses are losing a staggering $62 million (31 million)[1] per year through employee misunderstanding
UK and US employees are costing businesses $37 billion (18.7 billion)[2] every year because they do not fully understand their jobs, according to a new IDC white paper commissioned by Cognisco, the worldís leading intelligent employee assessment specialist.
ë$37 billion: Counting the Cost of Employee Misunderstandingí reveals for the first time the scale and impact on businesses of employee misunderstanding. Employee misunderstanding is defined as actions taken by employees who have misunderstood or misinterpreted (or were misinformed about or lack confidence in their understanding) of company policies, business processes, job function or a combination of the three.
The research shows that whilst organisations are often aware of the costs of misunderstanding, only one in three claim to have taken any action to close the gap. By ignoring the issue, firms put themselves at risk for compliance, public safety and legal problems.
Approximately two thirds of the total cost of misunderstanding reported by organisations was attributed to loss of business due to unplanned downtime (32 per cent), poor procurement practice (17 per cent) and settlements for industrial tribunals (16 per cent). Other costs incurred include regulatory penalties and tax or revenue penalties.
The findings also highlighted that the real cost of employee misunderstanding may be even higher when costs such as impact on brand, reputation and customer satisfaction are taken into account. All 400 companies asked, reported that employee misunderstanding had placed their company at risk of injuries to employees or the public, 99 per cent cited risk from loss of sales and reduced customer satisfaction in the last 12 months.
Other key findings from the white paper include:
On average businesses with 100,000 employees are each losing $62 million (31 million) per year at an average of $624 (315) per employee
The Banking industry has the highest cost of misunderstanding due to the high risk associated with handling funds, with the transport industry reporting the lowest cost
81 per cent of banks reported exposure to impaired brand image and reputation in the last 12 months
36 per cent of transport organisations reported exposure to the risk of fatalities within the workforce or public in the last 12 months
52 per cent of petrochemical organisations reported a risk to health and safety compliance in the last 12 months
89 per cent of pharmaceutical companies reported exposure to the risk of reduced productivity in the last 12 months
ìAn organisation's greatest asset is itsí employeesî, said Mary Clarke, CEO Cognisco. ìObviously if an employee misunderstands or misinterprets actions there will be repercussions from loss of business to impaired brand image. But what is often not measured, is the employeeís confidence to take the appropriate actions which can also have a significant impact.î
Of those organisations with an assessment programme in place more than 60 per cent reported fewer human errors, reduced employee churn and reduced health and safety breaches.
ìThis is the first time the cost of employee misunderstanding has been calculated. Large enterprises are potentially losing millions of dollars each year to ëemployee misunderstandingí yet very few organisations are taking action or are even aware a problem exists,î said Lisa Rowan, program director HR and Talent Management services, IDC. ìThe potential impact and repercussions from this misunderstanding should be addressed by all organisations and at the highest level ñ the CEO.î
The white paper recognises that a face-to-face approach in an organisation with employees in different locations is often logistically difficult, expensive and liable to errors. But, it suggests that the problem can be overcome by on-line assessments that employees can complete in their own time and which enables directors to assess quickly and cost effectively the location of the source of the problem. Surprisingly, the research revealed that only 6 per cent of the surveyed organisations had such a solution in place.
Clarke concludes: Weíve worked hard to develop software customised to a companyís diverse workforce and feed back to the Board information on those employees that need more coaching and training.
ìWith the introduction of the Corporate Manslaughter Act in the UK, which now makes company directors responsible for the actions of employees, there is no better time for companies to take action.î
To get further details of the white paper, please visit: www.cognisco.com/countingthecost or call 01908 757520.
[1] Average figure based on an organisation with 100,000 employees
[2] IDC research into ëThe cost of employee misunderstandingí among 400 UK and US global enterprises with over 5000 employees February - March 2008
$37 billion ñ UK and US businesses count the cost of employee misunderstanding
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